Sun tops off poor Q3 by axing execs

Sun dished out a bit of the expected and unexpected when announcing third quarter results today, confirming a large loss and revealing that a number of executives have been axed or shifted within the company.

Sun posted $2.7bn in revenue for the third quarter - a 5 per cent year-over-year decline from the $2.8bn reported in the same period last year. But the slight decline in revenue is good news compared to the loss Sun took in the quarter.

The company reported a net loss of $760m this period versus a profit of $4m one year ago. The loss includes a $300m charge taken for "an increase in the valuation allowance for deferred tax assets" and a $203m charge for workforce and real estate restructuring. Sun announced earlier this month that it would lay off close to 3,300 staff.

Excluding the charges, Sun still lost $260m in the quarter.

On the executive front, Neil Knox, the head of Sun's volume servers, and Mark Tolliver, chief marketing officer, have been sent packing. Clarke Masters, Sun's head of large Unix servers, will also shift to handle government customer sales.

To pick up the slack, current processor chief David Yen will now pick up Sun's SPARC server business, and the honorable John Fowler, Sun's current CTO of software, will pick up responsibility for Intel and AMD-based servers.

All around, these are very smart moves.

Masters came to Sun via the Cray acquisition and specialized in large multiprocessor servers. Sun, however, is moving away from large SMP systems and toward smaller boxes full of multicore processors. Yen has been the major player behind this shift.

Knox, while able to increase low-end SPARC server sales, failed to do much with Sun's Intel and AMD server business. Whether you look at the Cobalt boxes, the LX50 or new kit, Sun has largely flopped so far in its bid to compete with IBM, HP and Dell in the x86 world.

Fowler is a savvy executive with a deep understanding of both software and hardware and should be able to inject new lift into the x86 efforts. Where Knox came off as a used car salesman, Fowler comes off as an engineer trapped in an executive suite, which for a R&D focused company is a good thing.

This is the second major reorganization of the Sun brass in recent years - the first coming when President Ed Zander and other top execs left Sun in mid-2002. New President Jonathan Schwartz is said to be responsible for the latest moves.

Breaking down Sun's financial figures, the company's products business pulled in $1.7bn in Q3 versus $1.9bn in the same period last year. Services, however, continued to improve with $940m in this year's third quarter sales versus $893m in 2003.

Sun's operating costs went up from $1.3bn last year to $1.5bn this year. ®